Employment rose by a record 345,000 in the three months to April, although much of that was an increase in self-employment and Britain's workers were squeezed by a dramatic slowdown in pay growth easing pressure on rate hike expectations, official figures showed today.

The number of people in work stood at 30.54 million, according to the Office for National Statistics (ONS), after a rise which was the highest since records began in 1971.

Unemployment fell by 161,000 to 2.16 million, and the jobless rate dropped to 6.6 per cent, with both numbers better than forecast.

Record levels: UK employed has reached the highest point since records began in 1971.

Other data from the ONS showed jobseeker's allowance claimants fell by 27,400 in May to 1.09 million and the number of economically inactive people fell by 80,000 in the last quarter to 8.82 million.

Unemployment has been falling consistently for the past year and is well below the 7 per cent threshold that the Bank of England had said in August last year could trigger an increase in interest rates.

The economy has improved, and with it the job prospects of thousands of people, far more quickly than Bank policymakers had anticipated.

David Kern, chief economist at the British Chambers of Commerce (BCC) said: ‘These figures demonstrate the resilience and flexibility of the UK jobs market and points to continued strong positive growth in the second quarter of this year.

‘However, these positive job figures should not be used as an argument for supporting early increases in UK interest rates and greater clarity on the future path of rates from the MPC would help businesses to plan future investment.‘

As employment rose, pay growth for the period slowed to 0.7 per cent, a sharp fall on last month's figure of 1.7 per cent, blunting hopes of a return to a period of real-terms pay growth.

The increase was well below the latest inflation rate of 1.8 per cent, meaning the cost of living is still going up more quickly than pay packets.

This slowdown in total pay was largely accounted for by bonuses, which fell sharply compared with a period last year when in many cases they were deferred to April as tax changes were introduced. But regular pay growth also slowed, to 0.9 per cent from 1.3 per cent.

Samuel Tombs, of consultancy Capital Economics, said: ‘The latest UK labour market figures show that, while the unemployment rate is continuing to fall, there is still enough slack in the jobs market to prevent wage growth from picking up.

‘This meant that while the fall in joblessness should in theory bring a rise in interest rates a step closer, the weakness in wages indicated more underlying spare capacity in the economy which will need to be used up first.’

Much of the jump in the headline employment number was caused by a rise in self-employment, which rose by 337,000 to reach 4.54million

The unemployment rate of 6.6 per cent was at a five-year low. It has not been as low since the three months to January 2009.

Ben Brettell, economics editor at Hargreaves Lansdown stockbrokers, said: ‘The bigger picture is that there is a trend for both price and wage inflation to be subdued - any upward movement in real wages over the coming months is therefore likely to be a slow grind.

‘Today's figures are consistent with the Bank of England's view that, whilst it is improving, there remains sufficient slack in the labour market to justify leaving interest rates on hold for now.’

The number of people out of work for over a year was down by 37,000 to 791,000, with unemployment among 16 to 24-year-olds also falling.

Chris Jones, chief executive of skills education provider City & Guilds Group said: ‘Of course it’s great news that today’s figures show that more people overall are employed in the UK, but we can’t forget about the 853,000 young people who are still without work. Although the number has gone down, it is still far too high.’

The government has been urged to overhaul youth services so that councils can do more to tackle unemployment among young people.

Employment rate (aged 16 to 64), seasonally adjusted

The
Local Government Association (LGA) said almost every young person could
be in work or learning by 2020 if councils were given more
responsibility to run job schemes.

The
LGA said councils in Wales and England had overseen a 44 per cent drop
in the number of 16 to 18-year-olds not in education or work over the
past five years, compared with 7.5 per cent for schemes run by central
government for 19 to 24-year-olds.

However, while the UK economy appears to be doing nicely, the World Bank nonetheless trimmed its global growth forecast yesterday, saying a confluence of events, from the Ukraine crisis to unusually cold weather in the United States, dampened economic expansion in the first half of the year.

The institution predicted the world economy would grow 2.8 per cent this year, below its prior forecast of 3.2 per cent made in January, but it expressed confidence activity was already shifting to more solid footing.

In its twice-yearly Global Economic Prospects report, the World Bank said tensions between Ukraine and Russia hit confidence worldwide.

The bank also cut its growth forecast for the United States to 2.1 per cent from 2.8 per cent to account for the toll taken on growth by the weather at the start of the year.

The World Bank expects growth to quicken later this year as richer economies continue their recovery. It kept its global growth forecasts for the next two years unchanged at 3.4 per cent and 3.5 per cent, respectively.

This year marks the third straight year that developing economies would expand by less than 5 per cent, the report added.

Changes in people in employment between February to April 2013 and February to April 2014, seasonally adjusted